Potential Purchase Advice

John William Kuhfahl · 2024-08-20T10:05:58-07:00

Hey guys, this is my first post here and I'm still very much in the educational phase of my investing career (I guess one always is). I'm going to run some details by you and I'd like all of you who feel you are qualified to advise me so I can learn how to properly analyze these deals and be more cognizant of potential pitfalls/mistakes: So, I found this property off market in a Chicago real estate investment group. Here are the property details: SFH in University Park, IL 60484 - 4 bd / 2.5 ba / 2,315 sqft Asking Price: $165,000 ARV: $240,000 Notes: Property needs cosmetic work all around. Roof, HVAC and foundation all have no issues. My plan with a property like this would be to get positive equity asap and re-fi. I'm also partial to STR's at this point, so I'd like to make it an AirBNB. My questions are: How does an agent determine ARV? In your experience, is this a reliable indicator? What other factors should I pay close attention to in either the deal or when reviewing the physical property? How about if this is done remotely? I can post pics in here, but I'm also curious what factors would make this a better Section 8/LTR over an AirBNB. Please drop as much knowledge as you're willing and provide examples if you can. This really helps me to learn the ropes.

Paul De Luca

Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes

2y

@John William Kuhfahl

The ARV is determined by the comps. You'll want to do your own due diligence to verify the ARV is accurate.

When viewing the physical property, document the entire condition of the property. Take notes and photos to document everything. If you're having someone view the property for you, have them take videos and photos of the entire property.

LTR vs Airbnb - run the numbers and compare the pros and cons of both.

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Jonathan KlemmBusiness Member

Moderator

Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes

2y

Hey there @John William Kuhfahl - Congrats on the first post, and welcome to the Chicago BiggerPockets community!

Figuring out your ARV is the most important thing you can learn so great questions. You need to search for properties near your subject property deal that look like and have the same size as your end result aka a comp aka a comparable.

Any quality agent can run your comparable market analysis (CMA), and over time, with practice, you can run your own comps. My good buddy @Account Closed can definitely help you with this process!

It is important always to double-check everyone's work because no one is going to put in the true due diligence needed more than you!

My advice would be to stay away from short-term rentals before you get some more experience. It is a very system-driven profession and shouldn't be jumped into without the intention of building a business around it.

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Jennie Berger

Lender · Chicago IL · Member since 2020 · 357 posts · 229 votes

2y

@John William Kuhfahl

Welcome to the club! :)

I'll echo what both @Paul De Luca and @Jonathan Klemm have said.

And add the following:

1. The property you're considering is fairly far from 'Chicago.' You mentioned a possible remote walkthrough and purchase - are you local to this area?

I'm not too familiar with University Park, but in order to determine if it would make a good Airbnb, you'll want to research other similar properties (how they're priced / how often they're booked) in that area on platforms like Airbnb, VRBO, and Furnished Finder (if you're considering doing 30+ day stays, ie, an 'MTR' as well.)

Some questions to consider asking yourself:

1. Who will be in charge of the rehab, you or a GC or individual subcontractors?

1a. Have you estimated the repair costs?

2. What makes you think a short term rental home of that size will do well in that area?

3. Do you plan to rent it out as an STR as an entire home, or by the room?

4. Who is your target demographic if you do an STR?

LTRs are usually a 'safer' play, particularly if this is your first real estate investment property. Again, connecting with a local real estate agent in that area who knows the market inside and out is your best bet. Let them help you with comparables, recommendations for the types of rentals that do best in that area, and maybe even connect you with a local contractor who will be able to get you an accurate (ish) estimate on required repairs.

Hope this helps - best of luck with your journey!

Jennie Berger

Property People

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